ATGL Top Pick of the Week - ITBNew ATGL Top Pick of the Week is the Home Building Fund (ITB), and was bought on the Opening today at $124.03.
ITB trade ideas
Top Pick of the Week - Home Building Fund (ITB)For busy investors that don't have time to Swing Trade, we now have a simple Strategy: Top Pick of the Week. You Buy the "Pick" on Monday morning, and then Sell on Friday's Close. This week: ITB Home Building Fund.
ITB Breakout Analysis - Strategic Entry and Key SMA LevelsITB Breakout Analysis - Strategic Entry and Key SMA Levels
Overview
This analysis focuses on my recent trades in the iShares U.S. Home Construction ETF (ITB) and its technical landscape. Using the 50-day and 200-day Simple Moving Averages (SMAs) as key indicators, I identified a strategic buying opportunity during ITB’s consolidation phase, which has since materialized into a breakout.
Trade Strategy & Technical Analysis
1. Purchases Near the 200-Day SMA
I executed multiple buy orders around the **200-day SMA** (red line), specifically within the **$108-$110** range, during the market’s pullback in July and August. This level has consistently acted as strong support and provided a favorable risk-reward ratio for my entries.
2. Average Buy Price
My **average buy price** of **$108.82** (marked by the blue dotted line) aligns with the **200-day SMA**, reinforcing the significance of this support level. Historically, the 200-day SMA is a critical indicator for long-term trend strength, and my decision to accumulate at this level was based on the assumption of a sustained upward trend.
3. 50-Day SMA as Short-Term Support
The **50-day SMA** (green line) has served as dynamic support throughout 2024, offering additional validation for the bullish momentum. Once ITB broke out of the descending wedge pattern, reclaiming the 50-day SMA reinforced the potential for further upward movement.
Current Price Action
- Following the breakout from the **descending wedge**, ITB is now trading at **$123.97**, approaching the **$125 resistance level**, last seen in June.
- A successful break above this key resistance could signal a move toward the **$128** level, based on historical price action and technical targets.
Outlook and Strategy
- Bullish Momentum
With ITB consistently trading above both the 50-day and 200-day SMAs, the ETF is showing robust bullish momentum. The recent breakout strengthens the case for continued gains, and I plan to maintain my position while monitoring for further developments.
- Key Levels to Monitor
- The immediate **resistance** at **$125** will be a critical level to watch. A break above could lead to a potential extension toward **$128** or higher.
- On the downside, I will monitor the **50-day SMA** at **$117** as a key support level. Should the price pull back, this level could offer another opportunity to assess further action.
- Long-Term Support Consideration
In the event of a deeper correction, the **200-day SMA** around **$108-$110** remains a critical long-term support level. Should ITB revisit this area, I may consider adding to my position, as it aligns with my initial entry strategy.
Conclusion
The strategic accumulation near the **200-day SMA** at **$108-$110** has proven successful as ITB approaches key resistance at **$125**. The current bullish momentum suggests further upside potential, contingent on a breakout above resistance. I will continue to monitor the moving averages and price action closely for any significant changes in market dynamics.
#ITB #HomeConstructionETF #TechnicalAnalysis #TradingStrategy #SMA #StockBreakout #MarketAnalysis #TradingView
Analysis of ITB Stock Buys **ITB Buy Analysis and Breakout Alert**
Here's a detailed analysis of the iShares U.S. Home Construction ETF (ITB) with a focus on recent buy points and technical indicators:
**Buy Points**:
- Early March: $108
- Late March - Early April: $106-$108
- Early June: $100-$101
- Early to Mid-July: $98-$100
**Key Observations**:
- Recent breakout from descending trendline, signaling a strong bullish reversal.
- RSI at 72.91 indicates an overbought condition, suggesting a possible short-term pullback.
- Significant volume around buy points, supporting the upward momentum.
**Support and Resistance**:
- Strong support at $98-$100.
- Resistance at previous peak of $113.46.
Stay tuned for more updates and happy trading!
#StockMarket #Investing #ITB #ETFs #Trading #TechnicalAnalysis #Breakout #Bullish #TradingView #Finance
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The chart illustrates the daily performance of the iShares U.S. Home Construction ETF (ITB) over a recent period, highlighting specific buy points marked by green arrows. Here’s a detailed analysis:
1. **Buy Points and Price Movement**:
- **Early March**: ITB was bought at around $108. The ETF continued its upward trend to reach a peak of approximately $113.46, marking a successful buy.
- **Late March to Early April**: Several buys were executed around $106-$108, followed by a slight consolidation and a subsequent rise, suggesting a strong bullish sentiment.
- **Early June**: Multiple buys were made at around $100-$101. Post-purchase, ITB showed some volatility but maintained a general upward trend.
- **Early to Mid-July**: Buys around $98-$100 were followed by a breakout above the descending trendline, leading to a sharp rise in price.
2. **Technical Indicators**:
- **RSI (Relative Strength Index)**: The RSI was at 72.91, indicating that ITB was in overbought territory at the time of analysis. This suggests a potential pullback or consolidation phase might occur soon.
- **Trendline Breakout**: The recent sharp rise in price indicates a breakout from the descending trendline, which often signals a strong bullish reversal.
3. **Support and Resistance Levels**:
- **Support**: The $98-$100 range has acted as a strong support level, where multiple buys were executed, and the price rebounded each time.
- **Resistance**: The previous peak around $113.46 now acts as a new resistance level. A successful breakout above this could lead to further gains.
4. **Volume Analysis**:
- The volume spikes around the buy points indicate significant trading activity, which often precedes major price movements. The recent breakout with high volume supports the bullish outlook.
MEGA TRADE: Copper Short SqueezeCopper has had a monster run to the upside.
Its clearly going to affect aspects in the economy by applying upward pressure on inflation and downward pressure on home builders and construction.
Copper surging shows resilience in the global economy but simultaneously high copper prices could cure this rushing demand.
Copper technicals are screaming a pullback, a short setup is looming.
HOME BUILDER BOTTOMED wave 4 wave 5 just to start The home builders sector has a very nice correction I would be LONG calls in the sector NOW this is the last wave up use it also to sell into a new high all long term holdings as I will discuss near the 5th wave top
US Home Construction to SlowA giant wedge coming into play.
-6 deg trendline on top, 15 deg trendline (1+5=6... as above so below) on the bottom.
Harmonic shows double Giza (52) to binary YES handoff (11) with a pullback to Giza ($52) at 8/22 (128 inverse Giza)
Watching the interaction with the upper trendline for final confirmation of rally strength.
Inflation + Interest Rates + Job Loss will weaken demand in my view.
Magnet pullback to red resistance spiral for a retest.
Interesting connections.
Initial spiral convergence 02.07.2020 (27)
The overhead resistance spiral comes to an end on 10.27.2023 @ 27.72
Trade school: Parabolic moveThe ETF for home builders went parabolic last week, mostly because of an earnings blow-out from DR Horton (DHI). This chart is one to watch to see how dangerous parabolic moves can be. ITB faded intraday after stretching well above its upper Bollinger Band (BB). The BBs define an expected price range. So when price goes well above the upper-BB, the stock, ITB in this case, is "stretched" and due for a cooling period if not an outright pullback. I am watching this one closely as I am a perma-bull on housing.
Short US Home Construction ETF ITBITB is a US Home Construction ETF. Like many US equities, it's been struggling since December 2021. On the daily chart shown, price is experiencing a strong downtrend, as seen by the 21 EMA, 34 EMA and 50 EMA all sloping downwards. When the downtrend pauses and price retraces back to these EMAs, it typically falters and reverses.
On the daily chart between January and March of 2022, price rose to either the 21 EMA or the 34 EMA about 4 times. Each time, these daily EMAs held firm as resistance.
Note: All EMAs referenced below use the daily period.
January 13, 2022: price broke slightly above both the 21 and 34 EMAs only to reverse the same day and close below both.
February 9, 2022: after a 3-day rally, price made a feeble attempt to reclaim its 21 EMA. But price could not even touch the 21 EMA though it came very close.
March 2, 2022: price rose and closed above the 21 EMA but could not touch the 34 EMA. The next day price reversed lower and closed well below the 21 EMA.
March 18, 2022: price broke above both the 21 EMA and 34 EMA and closed above them both. This was a bull trap b/c the next day, price once again sliced back below both EMAs, closing below them.
April 20-21, 2022: Price broke above the 21 EMA two days in a row, but each day failed to hold above it.
One might argue that this time will be different. (See the price action within the blue circle.) Price broke above the 21 EMA yesterday and closed above it. But now it's falling below yet again. With trending securities, prices can indeed go lower in a downtrend or higher in an uptrend—prices heading to lower lows tend to go lower, and prices making new highs tend to go higher.
A triangle pattern has also formed, reflecting the recent consolidation and volatility compression in this ETF (and likely in the stocks within it). A cursory Elliott-Wave analysis also suggests that this is an EW triangle pattern that is part of a EW corrective combination pattern going back to April 7, 2022 (blue circle). For most of this year, the price action in between consolidations has been "motive," which is Elliott Wave terminology for moves in the direction of the trend, in a downward direction. The consolidations either upward or sideways have been countertrend, or corrective. So this adds support to my thesis that this current triangle pattern will resolve lower as well.
The first price target is 54.37. The second one is 45.10. I'm using simple long puts expiring 6/17 and 7/15. I'm using longer-dated expirations to prevent theta decay from being too substantial in the next 2-4 weeks.
6/5/22 ITBiShares U.S. Home Construction ETF ( AMEX:ITB )
Sector: Miscellaneous (Investment Trusts/Mutual Funds)
Market Capitalization: $--
Current Price: $60.52
Breakout price: $61.00
Buy Zone (Top/Bottom Range): $59.80-$54.00
Price Target: $67.40-$68.80
Estimated Duration to Target: 138-145d
Contract of Interest: $ITB 10/21/22 60c
Trade price as of publish date: $5.80/contract
Potential Bearish Flag in Homebuilder ETFHomebuilders are among the worst-performing groups this year as interest rates increase. Now there could be a bearish continuation pattern in the iShares U.S. Home Construction ETF .
ITB sank to a 52-week low around $57 one month ago, followed by a period of consolidation. The lows have inched higher during this time, creating a potential bearish flag.
Second, notice the lower highs starting on April 21. These occurred near a falling trendline along the highs of January and March.
Third, the eight-day exponential moving average (EMA) has remained below the 21-day EMA. That suggests the intermediate-term downtrend remains in effect.
Finally, ITB has yet to reach potentially important support. The main level buyers may target could be closer to $51.50, the lows in September and October of 2020.
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ITB Says Recession is Near, Bond Market RightSPY follows ITB, not the other way around. Don't fall for the emotional trap in the markets right now. Q3-Q4 2022 could be very ugly. Shemitah year also. Good luck.
Normalization Places Fresh Pressures on the Spring Selling Seaso{repost from my blog which includes screenshots and charts}
Housing Market Intro and Summary
The Spring selling season looked like it started strong for new home sales. The data for April reveal a story evolving differently. Absolute inventories rose for both existing and new homes and yet sales declined. Housing starts also suffered a setback. Median prices of homes soared, especially for new homes, as sales skewed more toward the higher end of markets. Home builders face increasing cost pressures and buyers lament affordability challenges. The stocks of home builders also felt the pressure in May during a sharp 2-day pullback. Yet, with mortgage rates still near record lows, sentiment remaining high among home builders, and the tailwinds of strong housing demand still blowing, the current “cooling” resembles an overdue normalization of the housing market. Important trends continue to point upward for now.
Housing Stocks
The iShares Dow Jones US Home Construction Index Fund (ITB) fell 1.8% in May for a rare down month. I finally brought my seasonal trade on home builders to an end given the sharp pullback in May and the softening housing data. ITB remains in a strong uptrend given support at its 50-day moving average (DMA) (the red line below) remains intact. However, I concluded the risk/reward no longer favors the seasonal trade with normalization placing fresh pressures on the Spring selling season. I made one last trade in ITB June call options during the May dip. Per the seasonal trade, I now look toward October/November to get aggressive on trades in housing-related plays.
The iShares Dow Jones US Home Construction Index Fund (ITB) lost 1.4% as it continues to pivot around its 50-day moving average in an extended trading range.
{The iShares Dow Jones US Home Construction Index Fund (ITB) survived its sharp May pullback with a successful test of 50DMA support.}
Toll Brothers (TOL) joined the ranks of stronger home builders with a solid 3.8% post-earnings bounce. TOL looks poised to challenge its all-time high set in early May.
{Toll Brothers (TOL) only closed below 50DMA support once during the May pullback. The overall uprtend looks well intact.}
Century Communities, Inc. (CCS) held onto its post-earnings momentum through the May pullback. CCS even ended the month hitting a new all-time high.
{Century Communities Inc (CCS) maintained a firm hold of its uptrend as defined by the 20DMA (the dotted line above).}
Lennar Corp. (LEN) is one of the home builder stocks that suffered most from the May pullback. LEN lost 7.1% on the day it sliced through 50DMA support. The stock traded down to a 2-month low before bottoming. The stock now faces overhead resistance converged at its 50DMA and downtrending 20DMA. While a fresh 50DMA breakout would suggest new light for the home builder trade, I will stay neutral even at that point.
{Lennar Corp. (LEN) is still trying to recover from the May pullback which plunged the stock into a 50DMA breakdown.}
Housing Data
New Residential Construction (Single-Family Housing Starts) – April, 2021
The February data showed softening for single-family housing starts. Starts normalized and returned to the year ago levels and the existing uptrend. March starts bounced smartly off the uptrend, but April starts dropped right back to February levels. While the monthly drop seems alarming, I continue to interpret the data as part of a process of normalization. Starts soared well above trend last year and are now returning to trend.
Single-family home sales dropped to 1,087,000 which was 13.4% below March’s 1,255,000 starts (revised slightly upward from 1,238,000). Starts were 58.7% above last year’s pandemic impacted starts. The rate of year-over-year change has remained positive for ten straight months.
{Source: US. Bureau of the Census, Privately Owned Housing Starts: 1-Unit Structures , first retrieved from FRED, Federal Reserve Bank of St. Louis, May 30, 2021.}
The Northeast led all regions with year-over-year gains. Housing starts in the Northeast, Midwest, South, and West each changed +247.8%, +44.7%, +43.6%, +81.5% respectively year-over-year.
Existing Home Sales – April, 2021
The report on existing home sales included the classic signs of a housing slowdown: an increase in inventory accompanied by a decline in sales. So far, I have yet to read a satisfactory explanation for this divergence (for example, did California’s jump in inventory and sales skew the numbers?).
Existing home sales dropped to levels last seen July, 2020 and have yet to respond to the start of the Spring selling season. The seasonally adjusted annualized sales in April of 5.85M decreased 2.7% month-over-month from the downwardly revised 6.01M in existing sales for March. For the second month in a row, the National Association of Realtors (NAR) blamed the monthly drop in sales on insufficient inventory despite an increase in absolute inventory. The NAR looks forward to more inventory with “the falling number of homeowners in mortgage forbearance”; a looming an unwelcome event for many households. Year-over-year sales increased 33.9% over last year’s lockdown-impacted sales.
Normalization for existing home sales includes a topping pattern.
{Source: National Association of Home Builders (the NAHB’s record of the NAR existing homes data)}
The absolute inventory level of 1.16M homes increased by 0.09M from March. Inventory dropped 20.5% year-over-year (compare to March’s 28.2%, February’s 29.5%, January’s 25.7%, December’s 23%, November’s 22%, October’s 19.8%, September’s 19.2%, August’s 18.6%, July’s 21.1%, June’s 18.2% year-over-year declines, unrevised). The inventory situation is finally improving ever so slightly even though the NAR did not recognize it as such. “Unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March’s 2.1-month supply and down from the 4.0-month supply recorded in April 2020. These numbers continue to represent near-record lows.”
Given the slow start to the Spring selling season, I now fully doubt that the NAR’s optimistic forecast for an 8.2% year-over-year increase in single-family existing home sales will bear fruit. The tough comps coming later this year will wipe out the strong year-to-date, year-over-year gain of 20%. Affordability problems present more and more challenges to buyers. Yet, the NAR remains steadfastly optimistic that coming inventory will cool down price appreciation: “The additional supply projected for the market should cool down the torrid pace of price appreciation later in the year.”
The average 17 days it took to sell a home set a new all-time record low that slipped by the record of 18 set in March (once again, the NAR did not acknowledge the new record). The on-going year-over-year decline in inventory is on a 23-month streak.
The median price of an existing home soared to $341,600 and set a fresh record high. Prices have increased year-over-year for 110 straight months, and April’s was a 19.1% year-over-year gain. The percentage gain was also a new all-time record surpassing the 17.2% record from the previous month. The median price increased from March by 4.7%.
Soaring prices are still not slowing down first-time home buyers as a share of all buyers. First-time home buyers took a 31% share of sales in April down just slightly from March’s 32%. The NAR’s 2017 Profile of Home Buyers and Sellers reported an average of 34% for 2017, 33% for 2018, 33% for 2019, and 31% for 2020. Investors picked up the slack with 17% share of sales, up from March’s 15%, up from 10% a year ago.
The West towered above all other regions for existing home sales. The regional year-over-year changes were: Northeast +16.9%, Midwest +0.8%, South +15.9%, West +15.5%.
All regions registered strong year-over-year price gains. For April: Northeast +22.0%, Midwest +13.5%, South +15.8%, West +19.9%.
Single-family home sales decreased 3.2% from March and increased on a yearly basis by 28.9%. The median price of $347,400 was up 20.3% year-over-year.
California Existing Home Sales – April, 2021
Unlike the country overall, existing home sales in California are responding to the Spring selling season. An expanding set of records are staving normalization. These sales increased for the third month in a row (after revisions). A monthly 7.4% increase in inventory helped support red hot demand in the state. For April, the California Association of Realtors (C.AR.) reported 458,170 in existing single-family home sales for California. Sales increased 2.6% from March and increased 65.1% year-over-year. At $813,980 the median price jumped 7.2% month-over-month and 34.2% year-over-year.
California set yet more records for existing sales in April.
$813,980 median price (broke March’s record)
$383 per square foot
65.1% year-over-year price increase (from pandemic-impacted levels)
The share of homes sold above asking price
The sales-to-list price ratio
7 median number of days to sell a single-family home (down from 13 days a year ago and down from 8 in March).
The increasing price pressures prompted C.A.R. Vice President and Chief Economist Jordan Levine to doubt the durability of California’s housing market: “Not only do skyrocketing home prices threaten already-low homeownership levels and make it harder for those who don’t already have a home to purchase one, it also brings to question the sustainability of this market cycle.” In other words, the Californian housing market is overdue for normalization.
Inventory dropped to 1.6 months of sales in April from 1.7 in March (revised upward). Active listings dropped over 50% year-over-year for the fourth month in a row. San Francisco sat alone as California’s only county that increased listings (22.7%). Still, the county recorded a healthy 165.7% year-over-year increase in sales with the 2nd smallest increase in median price in California at 5.9%. Clearly, buyers are finding relative “bargains” in San Francisco. The sales activity now flies directly counter to the exodus narrative.
San Mateo became the first Californian county to crack the $2M median price mark. California experienced a stark skew in sales toward higher-priced markets:
“The million-dollar segment increased in demand by more than 200 percent year-over-year, with sales of homes priced $2 million and higher surging over 300 percent from a year ago. Sales of properties priced below $300k, on the other hand, continued to fall precipitously, with the year-over-year growth rate dropping 34 percent in April. Tight housing supply continues to be the primary constraining factor for sales in the lower price segment.”
New Residential Sales (Single-Family) – April, 2021
The path to normalization for new single-family home sales includes a peak that stretches out from July, 2020 to January, 2021. New home sales in February dropped to the lowest point since June, 2020. After what looked like a strong start to the Spring selling season for new home sales, April undermined the narrative with a monthly decline of 5.9%. April sales increased 48.3% year-over-year from the pandemic trough. March sales were revised significantly down from 1,021,000 to 917,000.
{Source: US. Bureau of the Census, New One Family Houses Sold: United States , first retrieved from FRED, Federal Reserve Bank of St. Louis, May 30, 2021.}
Median home prices ended a two month decline and rebounded sharply just short of the all-time high. The 11.4% increase was the second highest since on record (since 1963). Last Fall’s breakout to all-time highs now looks sustainable. April featured a strong skew to higher-end home sales, likely driven by California’s strong performance. The 19% of sales in the $500,000 to $749,999 price range could be a major high (I reviewed the reports as far back as 2014). The share of sales above that price range nudged up from 6% to 7%. The share of sales in the $200,000
to $299,999 price range plunged from 35% to 25%.
The monthly inventory of new homes for sale rebounded from March’s 3.6 months of sales to 4.4 months. The absolute inventory level of 316,000 was an increase from March’s 306,000. So, just as with existing home sales, my red flag went up seeing sales decline despite the increase in inventory.
The West lagged all regions for a second month in a row for year-over-year sales changes despite being the only region with a month-over-month gain. The Northeast soared triple digits again, this time 100.0%. The Midwest increased 46.7%. The South increased 61.2%. The West increased 11.6%. New home sales in the West remain well off their pandemic highs and are marginally off the pandemic lows. If not for California’s strong performance, the West may well be right back to pandemic lows.
{U.S. Census Bureau and U.S. Department of Housing and Urban Development, New One Family Houses Sold: United States , retrieved from FRED, Federal Reserve Bank of St. Louis, May 30, 2021}
Home Builder Confidence: The Housing Market Index – May, 2021
The National Association of Home Builders (NAHB) reported no change in the NAHB/Wells Fargo Housing Market Index (HMI) from April’s 83 level. In April, the NAHB pointed to strong demand as a driver boosting confidence despite supply chain issues. May’s report focused on soaring construction costs: “Policymakers must take note and find ways to increase production of domestic building materials, including lumber and steel, and suspend tariffs on imports of construction materials. In recent months, aggregate residential construction material costs were up 12 percent year-over-year, and our surveys suggest those costs are rising further. Some builders are slowing sales to manage their own supply-chains, which means growing affordability challenges for a market in critical need of more inventory.” Accordingly, the NAHB projects more price increases ahead for new homes.
The components of the Housing Market Index (HMI) barely budged from April to May while consumer sentiment suffered a large setback.
{Source for data: NAHB}
While the aggregate HMI remained flat, regional HMI’s moved all over the place. The Northeast plunged from 84 to 77. The Midwest pulled back from 75 to hit 72, a new low for 2021 and the lowest point since August, 2020. The South nudged upward from 84 to 86 for a new high for the year. The West remained at its lofty level of 91. These high levels stand in stark and surprising contrast to the relatively low levels of new home sales. For more consistency, I want to see the West’s new home sales move much higher from the pandemic lows.
Home closing thoughts
Housing On A Sugar High?
Demand and prices in the housing market are both strong. Yet, the Federal Reserve continues its furious pace of purchasing Mortgage Backed Securities (MBS). The traders on CNBC’s Fast Money cannot explain why. As a result, they mused over whether the housing market is feeding off a “sugar high”, a high that inevitably comes crashing down. Is it possible the MBS market remains broken? Insufficient buyers? Whatever the reason, the support for MBS’s is helping to support a high velocity of housing activity.
My favorite investment in the MBS recovery remains AGNC Investment Corp (AGNC). I made the case for buying AGNC in the immediate wake of the collapse of the MBS market.
{The remarkably consistent uptrend for AGNC Investment Corp (AGNC) looks like a direct beneficiary of support from the Federal Reserve.}
Lumber Watch
Lumber prices finally cooled off in May. Futures for lumber are still in a strong uptrend as demonstrated by the 50DMA. While this pullback brings some relief to the industry, the accompanying drop in housing sales and starts make me wonder whether cooling lumber prices signal a cooler housing market ahead. This decline could at minimum represent a reluctant slide into normalization.
Lumber futures cooled off in May.
Earlier in the month, the NAHB posted alarming info on soaring material costs for home builders. Building materials prices are setting new records in aggregate. Chart after chart in this article show soaring prices for steel mill products, softwood lumber, gypsum products, and on-going price increases in ready-mix concrete.
Be careful out there!
Full disclosure: long ITB call options
ITB monthly - totally brokenMACD is negative, RSI is below 50, price is below 10 month MA, long term trend line broke, 6/10 month MA crossed.
A classic squeese for ITBITB is going through a classic Bollinger Band squeeze as it consolidates within an uptrend. A consolidation within an uptrend is a bullish continuation pattern and this favors a breakout to the upside, and new highs. Re-evaluate on close below January low.
Homebuilder ETF: Oh Breakout, Where Art Thou? Homebuilders were one of the strongest industries early in the pandemic as city dwellers headed to the suburbs. While the social trend has continued, bullishness has faded in the stocks.
This chart shows the broken trend line in the iShares US Home Construction Index. It apparently tried to form a bullish ascending triangle against resistance at $58.50 but never broke out. ITB is now at risk of breaking down if dip buyers back out.
Next, prices are under the 50- and 100-day moving averages, unlike most stocks in the market. That indicates the longer-term momentum is weakening.
Third, ITB's weekly chart shows a bearish inside candle before Christmas. A bearish outside bar followed the next week.
Finally, the last rally on December 17 and 18 resulted from Lennar’s better-than-expected quarterly results. The lack of follow-through suggests the market doubts the staying power of that positive news.
Investors could be wary of soaring prices for materials like lumber and copper. Even with home prices rising and inventories tight, profit margins could be at risk.
Note: This chart uses the custom script Smart Relative Strength .
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Homebuilders Could Be on Solid GroundHousing stocks outperformed earlier this year thanks to low interest rates, an exodus from cities and tight inventories. They recently pulled back but could now be at support.
The iShares US Home Construction ETF is sitting around the same $52 zone where it bounced in September and late October. ITB is also near its 100-day simple moving average (SMA), a line it hasn’t tested since the rally began.
Interest rates are the other key issue. Homebuilders fell recently as Treasury yields jumped. But that trend might have run its course for now because bond prices are back at the bottom of the channel cited last week .
Finally, attention could soon return to the industry with key events next week: NAHB’s sentiment index, housing starts/building permits, plus earnings from Home Depot and Lowe’s.
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XHB-1.0*ITB $ITB(HomeConstr Ishares) vs. $XHB(HomeBuilders SPDR)Quantamental Tools for Proprietary and Retail Investors.
Statistical Arbitrage Opportunities Delivered to Your Inbox.
QuantChart. io
Long 100 $XHB
Short 100 $ITB
Mean Reversion Time: 8 Trading Days
ITBTough week for homebuilders with increase in yields. However, will have no issue reentering this trade with a breakout back towards ATHs.
Bullish Triangle(s) in Housing ETFOf all the non-technology corners of the market, housing has been pretty much the strongest group this year. Most people know the story: lean inventories, low interest rates, demographic trends and a post-Covid surge in suburban living.
As often happens, this fundamental backdrop has played out technically. The iShares US Home Construction ETF barely pulled back as volatility swept the broader market this month. It also made a higher low last week when the S&P 500 and Nasdaq-100 made lower lows .
That consolidation period is now turning into an ascending triangle, with resistance at the top around $56.50.
This can be a relatively straightforward bullish continuation pattern.
Looking at a shorter time frame this week, another smaller triangle is forming above the 8-day and 21-day exponential moving averages (EMAs). This has the potential to draw more buyers and sneak toward a breakout.
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